High inflation, rising interest rates and a gloomy economic outlook – Amazon is also feeling the effects. The forecast for the final quarter is correspondingly weak.
The world’s largest online retailer, Amazon, is expecting surprisingly weak Christmas business in view of increased inflation and fears of a recession. The group expects revenues of between 140 billion and 148 billion dollars in the final quarter, as announced on Thursday after the US stock market closed.
That corresponds to a meager growth by Amazon’s standards of between two and eight percent compared to the same period last year. Analysts had expected significantly more. Investors dropped the stock by more than 20 percent in an initial reaction. In regular trading on Friday, the price fell by around 10 percent.
The profit forecast also caused disappointment. Amazon forecast earnings in a very broad range from zero to $4.0 billion for the three months to the end of December. In the past third quarter, the company earned $2.9 billion, a good nine percent less than a year ago. Although sales grew by 15 percent to 127.1 billion dollars, they also remained below market expectations. Even Amazon’s lucrative cloud division, which provides storage space and online services to other companies, has seen growth slow.
Expenditures increase faster than income
Amazon Web Services, the flagship of the cloud sector, increased revenue by 27 percent to $20.5 billion. In the previous quarter, the increase was just under a third. Although Amazon says it is tightening its costs in the face of inflationary pressures on gasoline, energy and transportation, spending is growing faster than revenue. Last quarter, operating expenses climbed 18 percent to $125 billion. In addition, Amazon – like many international US corporations – is suffering from the strong dollar, which reduces foreign earnings after conversion into local currency in the balance sheet.
Amazon’s CFO Brian Olsavsky announced in a conference call after the quarterly figures were presented that he would further reduce costs: “We are taking measures to tighten our belts”. There are said to be hiring pauses in some business areas, and the company also wants to discontinue certain products and services and reconsider investments. Austerity measures could, however, slow down growth that has been relatively sluggish recently. Amazon – like the other large tech companies – already has a difficult time on the stock exchange. The share price has already fallen by more than a third since the beginning of the year. Amazon’s market value fell below $1 trillion in early US trading on Friday.